Section 1031

Section 1031

A section of the Internal Revenue Code that allows for the deferral of capital gains taxes on the exchange of two assets, of like kind even if of different quality, provided that the assets are used for a business purpose. Under Section 1031, the goods exchanged are not assessed capital gains taxes, or more properly, capital gains taxes are deferred until an asset is resold with no intention of reinvestment. Section 1031 also allows one to sell an asset with the intention to use the proceeds to buy a similar asset. For example, if a farmer sells his farm and uses the money to buy another farm, capital gains taxes are likely deferred on the money he made on the sale of the first farm. The same would be true if the he traded a farm for a farm. Stocks and bonds are expressly excluded from this preferential treatment.

Section 1031 (26 U.S.C.§1031)

The Internal Revenue Code section that addresses tax-deferred exchanges, also called like-kind exchanges. See 1031 exchange. To find the law's text, see the instructions at Section (federal code).

As many wealthy clients settle into their retirement years, they have been able to use Section 1031 of the Internal Revenue Code as a tax-planning measure when buying and selling real estate as an investment property.

Section 1031 provides that gain or loss is not recognized if property held for productive use in a business or for investment is exchanged for property of a "like-kind" to be held for similar purposes.

For almost 100 years, the Internal Revenue Code has included a provision called Section 1031 that allows investors to exchange their investment in one asset for another one, while deferring the payment of taxes until the ultimate disposition of the replacement asset.

For the eco-wise investor who has done the land use and envisioning homework there are many exciting ways to produce positive outcomes, including the possibility of tax advantages such as those available through Federal and State programs and the 1031 Like-Kind Exchange as defined by section 1031 of the Internal Revenue Code, 26 U.

When corporations are considering the disposition of business assets, one of the issues that frequently arises is whether a like-kind exchange under section 1031 of the Internal Revenue Code might be available to defer gain recognition.

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